THATCHER AND THATCHERISM IN RETROSPECT

Speech at the University of New South Wales, 3 June 1999
Just the title "Thatcher and Thatcherism" summons up all sorts of images:

the Iron Lady

the handbag

Phrases such as:

"the lady’s not for turning"

"there’s no such thing as society"

or even

"no, no, no"

It is now twenty years since Margaret Thatcher was elected Prime Minister of Great Britain, and over eight years since she left office. So this seems a good opportunity to look back at what Thatcher and Thatcherism may have achieved, and what may be the lessons for today.

I must start with a disclaimer. I’m the British High Commissioner and normally speak on behalf of the British Government in Australia. But I hope you will realise that in addressing a subject such as this I am speaking in a personal capacity. I am not quite sure what the Foreign Office would say if I asked them for the official line on Thatcherism. Given some of their run-ins with her on foreign policy, and on Europe in particular, it’s perhaps as well that I haven’t tried.

I’ve had limited personal contact with Mrs Thatcher. I first met her at a swimming pool, in 1966, during my school speech day. I was at school with her son Mark. I can’t say the encounter made a deep impression on me, except for the way my father and she engaged in deep political conversation, while my mother gossiped to Dennis and I did my best to chat up Mark’s sister Carol.

My next encounter was at somewhat greater distance. In 1971, Margaret Thatcher was Secretary of State for Education in Ted Heath’s Government and I was a student at Cambridge University. She was speaking in a debate at the Cambridge Union and I was one of those outside, demonstrating against Government cuts in university funding. I suppose it was probably just as well for my future career that she wouldn’t have recognised me under the long hair and the beard I had in those days.

I have met her a few times later on during my civil service career—when she has always been unfailingly polite and willing to listen to what a quite junior official had to say if she thought they had a point to make. But the bulk of my career was in fact working for Ministers who—to a greater or lesser extent—fell out with her. Nigel Lawson, who was Chancellor of the Exchequer, and in many ways one of those who most closely shared her philosophy on freeing markets and on cutting spending and taxes. But who disagreed with her strongly on exchange rate policy and on the poll tax, leading eventually to his resignation.

And then I worked for John Major, when he was Prime Minister, and in effect her anointed successor. But who found it hard sometimes to cope with the ‘voices off’ from Mrs Thatcher or her friends criticising him for not following her policies or her advice.

So I welcome this opportunity to step back and reflect on Thatcher and Thatcherism.

By any standard, she is a remarkable figure. The longest serving British Prime Minister this century. The only one to have won three successive General Elections—and indeed she was never defeated at a General Election. The only woman Prime Minister. The only one with an "ism" associated with her.

I want to concentrate on her period as Prime Minister. But I first should put it in context by setting out some of the background. For she became Prime Minister at a time when some of the accepted nostrums that had guided British politics in the post-War period were breaking down. The idea of the Government being able to secure full employment by demand management. The idea that the best way to achieve industrial success was through Government intervention. The belief that the State could provide increasing public funding for welfare spending, paid for out of taxation. The sorts of policies that Corelli Barnett in looking at the post-War consensus described as the New Jerusalem.

To be fair, the Heath Government of 1970, of which Mrs Thatcher was a member, had come into office with a commitment to reducing Government intervention in the economy, to cutting taxes and spending and to setting up a legal framework for industrial relations—all policies that might be thought of now as "Thatcherite." But Ted Heath’s Government ran into huge economic problems—against the international background of the first oil price shock and the collapse of the Bretton Woods currency arrangements. And it engaged in a spectacular U-turn, introducing a statutory prices and incomes policy and taking wide powers to intervene in industry.

It was after the fall of Ted Heath’s government that Mrs Thatcher challenged him for the leadership of the Conservative Party, and won. She faced a Labour Government that was struggling with Britain’s economic malaise, and had difficulty exerting authority with no real Parliamentary majority. Internationally, Britain was seen as something of a basket case. It was in 1976 that President Ford said "It would be tragic for[the United States] if we went down the same path and ended up with the same problems Great Britain has." The final days of the Labour Government were marked by public sector strikes—the so-called "winter of discontent", and much comment about whether Britain had become ungovernable.

Mrs Thatcher set about to change that. She was not afraid to challenge conventional wisdom, or to say clearly what she thought was right. Very different from Harold Macmillan who had once said "if people want a sense of purpose they should get it from their archbishop … not from their politicians."

Contrast that with Mrs Thatcher on one of her pet hates, consensus politics. It was during a visit to Melbourne in 1981 that she said: "To me consensus seems to be the process of abandoning all beliefs, principles, values and policies in the search of something in which no one believes but to which no one objects."

In opposition, she had developed her philosophy, based around free market economics, self-reliance and a smaller role for Government. She had drawn on the ideas of people like Hayek and Milton Friedman—with Keith Joseph, one of her colleagues, providing much of the stimulus and intellectual framework. But it would be wrong to think that she was in some way molded by others, and she had no ideas of her own. As long ago as 1968 she had said in a speech to the Conservative Political Centre: "what we need now is a far greater degree of personal responsibility and decision, far more independence from the government and a comparable reduction in government."

Indeed, I believe one of the traps that some writers fall into is an intellectual snobbery towards Mrs Thatcher. A tendency to ridicule her corner-shop economics, her beliefs in so-called Victorian values such as hard work, personal responsibility and thrift. And to think that because she sometimes expressed across her beliefs in these terms, she simply didn’t understand more sophisticated economic concepts.

That's certainly not the truth. One of Mrs Thatcher’s qualities was the ability to put things across in simple language that many people could understand and relate to. Terms like "fiscal policy" and "public sector financial deficits" leave most people cold, and don’t help to explain for example why cuts in public services may be necessary. But concepts like "thrift" and "not spending more than you earn" do get across. It is ironic that one of New Labour’s great achievements was to discover how to put across their messages in a simple way that caught the attention and imagination of millions of voters, those who would once have been voting for Mrs Thatcher.

It wasn’t of course just journalists or academics who initially had a snobbish attitude towards Mrs Thatcher. That was true of much of the Tory Party hierarchy too. She was never an insider in Tory politics, though she was to build up a devoted following. And during her first period as Prime Minister, it often seemed that her main battles were with her own Party rather than the official opposition.

I find it helpful to analyse Mrs Thatcher’s Government in three periods, roughly divided by the election victories she won in 1979, 1983 and 1987. The first period , from 1979 to 1983, was one when she laid some of the foundations, but also one marked by internal struggles and set-backs—until the mood was transformed by the Falklands War. The second period, from 1983 to 1987 (in practice a bit later) was the one where her Government was at its most radical, with a strong sense of purpose—though it was also the period when some of the seeds of her downfall were sown. The third period, from perhaps 1988 to 1990 was when she—and crucially some of those around her—became over-convinced that they knew best, and she lost her touch in reading the political mood.

As always with such a strong personality, the myth of Thatcherism can eclipse the reality. Her first term of office was the one when "Thatcherism"was coined, and some key policy changes were made. But it was also one marked by real economic and political difficulties.

Let me start with the economy and taxation, since the Treasury is the department I know best. Mrs Thatcher inherited a tax system that was certainly in need of reform. It seems incredible nowadays to recall that the top rate of income tax in 1979 was 83%—and with a surcharge on top of that for investment income. In her Government’s first budget, the top rate was cut to 60% and the basic rate from 33% to 30%—paid for by increasing VAT (GST) to 15%. Exchange controls and statutory price controls were abolished. First steps were taken on trade union reform—to deal with secondary picketing and the closed shop, for example. A start was made on privatisation—though a pretty cautious one: it was companies like British Aerospace, National Freight Corporation and Cable and Wireless that were privatised then, rather than any of the big utilities. Perhaps more significantly, a start was made on selling council houses to their tenants, a policy that was to prove extremely popular as house prices started to rise through the 80s.

Economic policy was re-focussed on controlling the money supply. But that didn’t prove an instant remedy to inflationary pressures such as the oil-price rise in 1979, the large pay rises for public sector workers that soon fuelled private sector demands, and the short-term price effects of the VAT increase. The result was that interest rates had to be pushed up to 17%, which did eventually succeed in getting inflation under control. But at the cost of a severe recession and unemployment that rose to over 3 million.

This led to considerable political and social unrest. Politically, Mrs Thatcher faced criticism from the so-called "wets" in her party, leading to her famous "not for turning" comment at the Conservative Party Conference. Industrially, she faced the prospect of a miners’ strike, at a time when it was not clear the Government could win—and so she backed down. Domestically, there were riots in Brixton, Liverpool and elsewhere; and troubles continued in Northern Ireland, with the assassination of Lord Mountbatten and the hunger strikes in the Maze Prison. Internationally, Britain got a partial rebate on contributions to the European budget, but couldn’t get a final settlement.

It was not a comfortable political backdrop for a first-term Government. True, there were signs by 1983 that the economy was emerging from recession. And the Labour Party was not proving an effective opposition, with Michael Foot having taken over as leader and with its manifesto promising renationalisation, repeal of trade union reforms, and unilateral disarmament—described as "the longest suicide note in history."

What really transformed the political scene was the Falklands War. I must confess to being one of those who had great doubts about the wisdom of sending the task force to try to retake the islands some 8000 miles away. But Mrs Thatcher read the mood of the British people well. She understood the sense of national humiliation there would have been if Britain had been unable to help protect one of its territories from invasion. And she was able to keep the British people behind her, and to take advantage of the mood of relief that emerged when the islands were retaken. She won the 1983 election by a landslide.

That provided the platform for many of the reforms that are associated with Thatcherism. Over the period up to and after the next election, the Government embarked on its privatisation programme with vigour: British Telecom, British Steel, British Gas, and then the electricity and water industries. The miners threatened a new strike, but this time the Government was ready and took them on, having built up large stocks of coal at the power stations. The strike was bitter and divisive, but ultimately a victory for the Government, providing the background for further trade union reform, including in particular a reduction in trade union immunities from civil actions.

The economy began a long boom, one that was eventually to get out of hand. Real incomes began to rise strongly, house prices rose, unemployment fell, and the budget moved into surplus. That provided the opportunity for further tax cuts, bringing the top rate down to 40% and the basic rate to 25%.

In Europe, Mrs Thatcher had got into her stride. Circumstances worked in her favour. Having won a second election, the other European leaders knew they had to deal with her, and they needed her agreement to an increase in the European budget without which the Community would have gone broke. She used this to secure a permanent rebate for Britain’s budget contribution, widely seen as a personal triumph for her determined negotiating style. At the same time, though, she signed up to the Single European Act, arguing that the federalist aspirations were outweighed by the benefits from getting a single market established in Europe.

Internationally, she cemented her relationship with President Reagan, and struck up an admiration for Gorbachev and the move for reform in the Soviet Union.

But there were wobbles. The rather bizarre Westlands affair in 1986 cost her two Cabinet Ministers, including Michael Helseltine who was to prove dangerous on the back benches. But against the background of strong economic growth it wasn’t really any surprise when she won her third election victory in 1987.

What went wrong after that, so that she lost the Tory Party leadership some three years later? Some of the seeds had already been sown. The poll tax proved to be a disastrous miscalculation, one that I witnessed closely from the Treasury, where Nigel Lawson was one of the fiercest opponents. The previous system of property taxes—rates—had long been disliked by Mrs Thatcher and she had searched around for a replacement, without success. She assembled a new team to look at the issue again—a team that was desperately keen to give her the answer she wanted, even if that meant glossing over some of the dangers. The idea was simple: everyone should pay a contribution towards the local services they enjoyed. But the new system was demonstrably unfair, even after money had been thrown at it to reduce the numbers who would lose. It proved hugely unpopular, especially among the middle-class, ironically the very group that Mrs Thatcher wanted to help.

The problem of people telling Mrs Thatcher what they thought she wanted to hear was I believe a wider one. After nearly ten years as Prime Minister, and with a formidable reputation, she was not getting—or not listening to—the dispassionate advice and warning noises that any Prime Minister needs. This was true across a wide range of areas, including in particular the feelings of her backbench colleagues in Parliament.

On Europe, she seemed to have got captured by her own image and rhetoric. In the mid 1980s, she had been in a favourable position since other European leaders needed her agreement. By the late 1980s, they had worked out ways to out-maneuver her, while she remained convinced she could simply say "no" to developments she didn’t like.

I witnessed some of this during the debates on monetary union. Nigel Lawson was convinced that a move on joining the so-called ERM could head off much more damaging pressure for a single currency—something for which he fully shared Mrs Thatcher’s aversion. But she refused to budge, and Britain was left as a spectator as the EMU bandwagon rolled on regardless.

And Mrs Thatcher was curiously wrong-footed by the collapse of communism and the emergence of democracies in eastern Europe. In some ways, this was one of her finest hours: she and President Reagan had taken uncompromising stands against communism and totalitarianism and had actively encouraged democrats in Russia and in eastern Europe. But when the change swept through Europe, it was as though Mrs Thatcher felt uncomfortable that old certainties were ending. In particular, she fought a hopeless battle to prevent or slow down German reunification, winning no friends in the process.

But what really brought her Prime Ministership to an end was the way she alienated many of her colleagues in Parliament who had once been her strongest supporters. By the end of her premiership, there was no one in the Cabinet surviving from 1979. Colleagues like Geoffrey Howe and Nigel Lawson, who had been at the forefront of the revolution in ideas in the early and middle parts of her premiership had resigned and were dangerous opponents on the backbenches, joining those who had never been great supporters of her in the first place.

Eventually, this caught up with her. She found that she didn’t have the Parliamentary support that she thought she had in a leadership election, and resigned. She was succeeded by John Major, whose approach was more conciliatory, looking for a nation more at ease with itself as he put it—and who won the 1992 election very much against the odds, before 18 years of Conservative rule came to an end in 1997 with the landslide victory for new Labour.

Having briefly taken you through her Prime Ministership, how does Mrs Thatcher’s record look in retrospect? Can we distinguish the myth from the reality? Can we form a judgement about how she will be seen in history?

I don’t doubt she will be seen as a significant figure. There are—inevitably—what might be called revisionist attempts to dissect each aspect of her record as Prime Minister, and to point up all the other factors and personalities that played a part. But this is a case where the whole is greater than the sum of the parts. As I hope I have indicated, Britain in 1990, when she left office, was a very different place from Britain in 1979, when she became Prime Minister. And she was one of the few British politicians to have achieved real international recognition.

But having warned of the dangers of not seeing the wood for the trees, I do want to go through some of the policies with which Thatcherism is closely associated.

Ironically, one the early hallmarks of Thatcherism, a belief in monetarist economics, has not stood the test of time, at least in its crude form. No one would now deny the primacy of monetary policy in controlling inflation. But almost no one would now advocate basing monetary policy on strict adherence to targets for the money supply. The relationship between inflation and monetary growth has proved too unreliable.

On other aspects of economic policy, a good deal of the framework that Margaret Thatcher championed has become accepted by both sides of the political spectrum. A belief in avoiding Government interference in industrial and commercial decisions. A belief in low Government borrowing and sound finance. A belief in keeping tax and spending strictly under control.

Indeed, the new Labour Government in Britain has taken the principles of sound finance well beyond anything attempted by Conservative Governments: it has made the Bank of England independent; it has increased the transparency of government finances, and it has committed the Government to the so-called "golden rule" of only borrowing to finance new investment.

But it would be wrong to imply that the Labour Government in Britain is simply carrying forward the economic revolution started by Mrs Thatcher. And this goes to the heart of one of the controversies surrounding Thatcherism: the growth in inequality, the sense that those in full-time work did well out of Thatcherist economic policies but that those without the necessary skills or opportunities were left behind.

Thatcherism gets blamed for not caring about the latter group. In this, Mrs Thatcher was to some extent the prisoner of her own rhetoric. Her emphasis on hard work and self-reliance inevitably gave the impression that if people didn’t succeed, it was their fault. And the issue gets mixed up with the wider impact of globalisation, which itself has brought about huge structural changes to the benefit of those with skills to take advantage of new technologies.

This brings me to one of the paradoxes of Thatcherism, that of control of public spending. In some areas, Mrs Thatcher’s Government was spectacularly successful in reducing public spending: on housing, thanks to the sell-off of council houses; on industrial support, thanks to the privatisation of loss-making nationalised industries. But social security spending continued to rise inexorably throughout her Government, despite a succession of attempts to make savings: whenever attempts were made to squeeze one area, spending ballooned out in another.

That is the background to the new Labour Government’s push for benefit reform, focussed on getting people off welfare into work. In contrast to Mrs Thatcher, it sees a role for Government in making society fairer, and in helping the disadvantaged who may lose out from a purely market-driven economy. It is doing this through reforms to the tax system—such as introducing a new working families tax credit—and through trying to make the benefit system better targeted.

The Chancellor, Gordon Brown, is also putting a new focus on improving productivity and competitiveness. Mrs Thatcher’s Governments achieved a huge amount in changing the culture of British industry, and in putting a new emphasis on enterprise. The British economy was in a sorry state when she took office, and seemed almost beyond repair. She is widely credited with turning that position around. But—paradoxically—despite that impression, Britain in fact continued to slip down the world league tables of economic performance.

The new Government is also tackling another of the paradoxes of Thatcherism. She is seen as someone who believed in rolling back the frontiers of the state. In principle, you might have thought she was supportive of devolving decision-making closer to the people. But in practice she was responsible for a marked centralisation of power, born out of a frustration that local authorities or other tiers of Government would not do things in the way she wanted. So she took much greater central government control over local authorities, and strongly resisted any devolution of power to Scotland and Wales. The new Government has come in with a commitment to pushing power back closer to the people, even if that produces policies they may not like.

How about social programmes such as health and education? I have not spoken much about them today, partly because I couldn’t cover everything, and partly because I do not think Thatcherism will ultimately be seen as being of huge significance in these areas. She—indeed most Conservative governments—have to grapple with the public perception that they are against state spending on health and education. So she faced the constant need to demonstrate that, as she put it, "the National Health Service is safe in our hands." There were significant reforms introduced, mostly quite late in her Prime Ministership, aimed at bringing more market-type pressures to bear so as to improve efficiency. Some of these the new Government has retained—including for example the drive to raise school standards—some it has reversed. But Mrs Thatcher did not alter the basic tenets of a universal state-run health-care system, or an overwhelmingly state-provided education system.

This brings me back to the point about myths and realities. When I was pondering what to cover in this lecture, I looked at some on-line biographies of Mrs Thatcher. Microsoft’s Encarta said "She privatised some nationalised industries and social programmes, including education, housing and health care." Another said "During her third term, Thatcher continued the Thatcher revolution by returning education, health care and housing to private control."

As I have explained, she did indeed privatise nationalised industries and much council housing. But she certainly did not privatise health or education. The myth diverges strikingly from the reality.

This brings me back to the image of Thatcher and Thatcherism. One point that surprises people overseas is that she was never a popular Prime Minister, at least if one measures that by opinion polls. The number of people expressing themselves "satisfied" with her performance as Prime Minister averaged under 40%, lower than Wilson or Callaghan and roughly the same as Ted Heath—and much lower than earlier Prime Ministers such as Macmillan or Eden. Where she fared better was on questions like "do you think Mrs Thatcher has been good for Britain", where a majority said yes. People in Britain respected her rather than liked her.

Mrs Thatcher will certainly go down in history as a strong leader. I must confess to mixed feelings about this. First of all, I don’t think it is widely recognised how much difference a large Parliamentary majority makes. If you have a large majority—as Margaret Thatcher did, particularly during her second and third terms—it is much easier to impose your own will and get things done. Mrs Thatcher often had back-bench rebellions but could afford to ignore them. By contrast, with a small majority, a Prime Minister has to temper his policies according to what he can get through Parliament, and is often criticised for weak leadership—as John Major found to his cost between 1992 and 1997. Equally, there are parallels here in Australia with the problems of getting legislation through the Senate.

There is also a danger that strong leadership can grow into authoritarianism. As I have indicated, some of the problems that lead eventually to Mrs Thatcher’s downfall came when she started to lose the support of the key ministers who had shared her initial vision. She became increasingly dismissive of anyone who disagreed with her, and was encouraged in this by a group who thought she could do no wrong. But even though there was still grudging public admiration for her power and her drive, there was a sense that people had grown tired of her bossiness and wanted a change to a more relaxed style. That was what John Major offered, and it enabled him to win an election in 1992 that I believe Mrs Thatcher would have lost.

When I worked for Nigel Lawson in the mid 1980s, I remember helping him with a speech called "The Tide Of Ideas." The thesis was that every now and then, British politics went through a sea-change, when a radical new Government would be swept into office, as in 1979. Such a Government could keep up its momentum so long as it continued to ride with the tide of ideas—and at that time, there was no sign of the tide turning.

But turn it did, as tides always do. John Major held it back in 1992, but eventually he was swept away by New Labour. But in 1997 it was a tide washing onto a very different shoreline. And one that the Labour Party had only been able to reach after going through a huge transformation itself.

There is much to argue about on the Thatcher legacy. How much was the British economy really transformed? How much damage was done by the growth in inequality? But the overall conclusion has to be that she made a difference. She came to power when Britain was feeling rotten about itself. She foght battles that needed to be fought. She was able, at her best, to instill a sense that Britain could hold its head up once again.

Today, we see widely contrasting views about her inheritance. Some in the Tory Party seek to distance itslef from Thatcherism, in search of a softer line on public services. Others, who were once ardent Thatcherites, now support Tony Blair, and believe he is the inheritor of her radicalism. Yet others argue that it was thanks to her that it became safe to elect a Labour Government.

Politics isn’t that simple, and Tony Blair is very much his own man. But whati is clear is that Thatcherism reains a potent political symbol, and will continue to be so in the future.